Under the epidemic, the automobile industry has become one of the major industries that have been seriously affected.
On April 9, Weilai said that since March, due to the epidemic, the company's supply chain partners in Jilin, Shanghai, Jiangsu and other places have stopped production one after another and have not yet recovered. Affected by this, WEILAI's vehicle production has been suspended. Due to the above reasons, many users' vehicles will be delayed in the near future.
Li Bin, founder, chairman and CEO of Weilai, admitted that raw materials, especially battery raw materials, rose too much, "the epidemic is even more unbearable", "In fact, in mid-March, some parts of Weilai were out of supply, relying on some parts inventory to barely support until last week (before The Qingming)".
Before the Qingming Festival, Qin Lihong, co-founder and president of Weilai, told the outside world that the Shanghai delivery center has been "turned off" for several days, and this state will continue until after the Qingming Dynasty. In just a few days, the impact of the epidemic on Weilai has continued from the market side to the production end.
There is more than one car company that has been forced to stop production due to the epidemic.
As early as March 16, due to the impact of the epidemic in Shanghai, Tesla's Shanghai Gigafactory had stopped production for two days. On March 28, Shanghai's epidemic prevention and control escalated, with the Huangpu River as the boundary of the division to carry out nucleic acid screening in batches, the implementation of 4 days of strict control management, according to Reuters, Tesla again stopped production for 4 days; FAW-Volkswagen and SAIC Volkswagen also announced the suspension of production after entering April.
As you know, Shanghai and its surrounding areas, Jilin and other places are the key gathering places of the automotive industry. According to data released by the Shanghai Municipal and Jilin Provincial Bureau of Statistics, the national automobile production in 2021 was 26.528 million units, and the output of Shanghai automobiles was 2.8332 million units, accounting for 10.68% of the national automobile production, ranking second in the country; the output of automobiles in Jilin Province was 2.4241 million units, accounting for 9.14%, ranking third. Together, they account for nearly one-fifth of the country's output.
Watchmaking: Ren Yafei
Affected by this round of the new crown epidemic, the production rhythm of automobile companies in Jilin, Shanghai and other places has been completely disrupted. According to the latest data from the Association of Automobile Manufacturers, in March, automobile production and sales totaled 2.241 million units and 2.234 million units, down 9.1% and 11.7% year-on-year. At the same time, FAW-Volkswagen sales fell by 40.2% in the first quarter, SAIC Volkswagen sales fell by 34.5%, SAIC-GM fell by 40.5%, and Dongfeng Nissan fell by 33.5%.
"At present, the epidemic in Shanghai has only affected individual enterprises in Jiangsu and Zhejiang, and if it continues, it may bring more uncertain impacts to the whole country, and we think it may bring 15% to 20% of the output loss." Cui Dongshu, secretary general of the Association, said.
Car companies are suspended
Specifically, during the worst period of the epidemic in March, several major domestic automobile production bases such as Jilin, Shanghai, Changchun and Guangzhou were seriously affected. The companies most affected include FAW-Volkswagen, FAW Toyota, Tesla, SAIC Volkswagen and NIO.
"The scene is comparable to the Spring Festival," a SAIC Volkswagen insider previously described to the media the details before the factory was closed, "the process is more dramatic, before the Puxi sealing management, the factory employees are ready to sleep in the factory closed production, March 31 logistics has arranged to bring two weeks of materials into the factory, but near the node to notify the end of work, the production line workers dragged large bags and small bags home." ”
It is understood that on March 31, a spokesman for the Volkswagen Group said that due to the difficulty of purchasing parts during the epidemic, the Shanghai Anting plant was partially closed from the same day.
According to China Entrepreneur, SAIC Volkswagen's five plants are located in Anting, Jiading District, Puxi. Jiading District is the area affected earlier in this round of the epidemic. Yu Jingmin, executive deputy general manager of sales and marketing at SAIC Volkswagen Co., Ltd., said that the number of employees in the closed-loop production of SAIC Volkswagen's Anting plant has reached 8,000 to 9,000, but even so, the production speed is still not as fast as before.
In fact, from March 14 to 15 and from March 21 to 22, SAIC Volkswagen was forced to carry out closed-loop operation and management of the Shanghai Anting plant. When the factory announced the closure, Zhou Libo, the final assembly workshop and body workshop manager of Anting No. 1 Factory, said that he had considered that all factories would stop work in those two days, but because Anting No. 1 Factory was a single-shift production, once the production was stopped for two days, it was almost impossible to make up for these production capacities later. After obtaining the approval of the local CDC, SAIC Volkswagen decided to implement closed-loop management for employees of Anting Automobile Plant No. 1 to reduce the impact of the epidemic on production capacity. Even so, the production capacity of Anting No. 1 Factory has also dropped from more than 320 vehicles per day before closed-loop management to about 200 vehicles per day during the closed-loop period, a drop of nearly 40%.
Tesla, based in Lingang, Shanghai, has also been affected by the epidemic control and has stopped work several times in March.
According to Reuters, according to a notice sent to suppliers within Tesla, Tesla's Shanghai factory announced a two-day suspension of production on March 16. Less than half a month later, Reuters reported that due to the impact of Shanghai's epidemic prevention policy, Tesla plans to suspend its production activities at its super factory in Shanghai from March 28, which will last for 4 days, and then due to policy changes, it has repeatedly postponed the resumption date, from April 1 to April 8. At present, Tesla officials have not informed the specific reasons, and whether production will resume is still unknown.
According to the calculation of 2,000 electric vehicles per day, Tesla lost at least 24,000 production in these 12 days, and the loss of production capacity in the later period is also difficult to predict. According to the reporter's understanding, Tesla's current scheduling order is about 20 weeks, the Model 3 series, Model Y long-endurance version, the expected delivery time is 16 to 20 weeks, about 4 to 4.5 months, Model Y rear-wheel drive version and high-performance version of the longest waiting time also reached 14 to 16 weeks.
Tesla's Shanghai Gigafactory is responsible for exporting globally, and this shutdown will undoubtedly affect its global delivery. In the first quarter of this year, Tesla delivered 310,000 vehicles worldwide, of which the Shanghai Gigafactory exported 40,500 and 33,315 vehicles in January and February, respectively, while only 60 vehicles were exported in March.
Dan Levy, an analyst at Credit Suisse, said: "Given that Tesla usually increases deliveries at the end of the quarter, we believe that the Shanghai epidemic will have a greater impact on it. ”
At the time of the first-quarter sales announcement, Musk tweeted that "this is an unusually difficult period due to supply chain disruptions and the impact of the epidemic", but the shutdown in April will make the second quarter more difficult.
Before the outbreak of the epidemic in Shanghai, FAW-Volkswagen in Changchun had stopped production. As early as March 13, FAW Group announced that all five major vehicle plants in Changchun, including FAW Toyota and FAW-Volkswagen, had planned to stop production, and initially planned to stop production until March 16. As of the early morning of April 10, it was still uncertain when the FAW-Volkswagen Changchun plant would resume work, and relevant people said that the resumption time "needs to be arranged in accordance with the government's unified arrangement."
In addition to Jilin, Changchun and Shanghai, the epidemic situation in Guangzhou, another major area of the automobile industry, has also recurred.
On April 9, Zhang Zhoubin, secretary of the party committee and spokesman of the Guangzhou Municipal Center for Disease Control and Prevention, said that after preliminary research, community transmission may have occurred in the sealed area, and there is a possibility of transmission to other parts of Guangzhou, and the current situation facing Guangzhou is more severe than the local epidemic prevention and control situation of the "5.21" Delta variant last year.
This means that the plants of GAC Toyota, GAC Honda, Dongfeng Nissan and other factories in Guangzhou, as well as many automobile plants in the surrounding foshan and Zhaoqing, are also facing potential suspension risks.
Broken chain crisis
The suspension of production is just the tip of the iceberg under the epidemic. How car companies deal with the chain reaction of the upstream and downstream of the automobile industry chain is a more urgent problem that needs to be faced behind the suspension of production.
Source: China Commercial Industry Research Institute. Watchmaking: Ren Yafei
Almost all of the world's top 100 parts and components companies have set up factories in and around Shanghai. From the first-tier suppliers of Bosch, Aptiv, BorgWarner, Denso, ZF, Yanfeng Visteon, to chip manufacturers Freescale, Deyi, to seats, instruments, tires, wiring harness suppliers, as well as all kinds of plastics, plastics, metal products, glass basic raw materials suppliers, there are thousands of large-scale suppliers. If you count small and micro enterprises, as many as more than 20,000.
The first to bear the brunt is the Tier 1 supplier.
In February this year, the Epidemic occurred at Bosch's Suzhou plant, and it subsequently told Reuters: "Due to the impact of the epidemic in Suzhou, it is expected that Bosch's manufacturing and post-production operations in Suzhou will be affected in the short term." Since then, the February sales released by Great Wall and Geely have plunged by 20.5% and 46% year-on-year, respectively, due to insufficient supply of bosch-produced body electronic stability systems (ESP). But even if there is an imbalance between supply and demand, Bosch will still be a major supplier when Geely announced the implementation of the supply chain replacement plan in the second quarter of this year.
Under the epidemic in Shanghai, Bosch has also been hit hard. At the end of March, Bosch issued a statement saying that "we are doing everything possible to maintain the supply chain and meet the needs of our customers" and announced that it would implement a "bubble" (similar to a closed loop) scheduling. But soon, Bosch took measures to lay off employees at two factories in Shanghai.
As the largest supplier of wire harnesses to the Chinese automotive market, Aptiv supplies Changan Ford, Tesla, SAIC, Ford, Toyota, FAW-Volkswagen and many other car companies. On March 29, the company asked some employees to start working from home. Since then, the addition of thyssenkrupp (engine manufacturer) has made the list of suppliers of parts affected by the impact longer and longer.
It is understood that on the evening of April 7, affected by the epidemic in Shanghai, Kunshan issued Circular No. 37 on epidemic prevention and control, deciding to extend the silence period by 4 days from 24:00 on April 8, 2022 to 24:00 on April 12, 2022. Previously, from April 3 to 6, Kunshan had already undergone a round of silent rest. It is understood that a number of printed circuit board (PCB) companies have gathered in Suzhou to provide car companies with electronic components for engine control systems, body control systems, chassis control systems, multimedia systems, navigation systems, driving recorders, reversing radars and other functions.
On the issue of supply chain shortage, the relevant person in charge of Nezha Automobile told China Entrepreneur that in early March, Nezha Automobile had asked some suppliers to increase safety stocks in the factory area for up to 7 days, in case freight could not come. After the Tongxiang Expressway was sealed, the vehicle took the nearby national highway, the speed was slower than usual - the factory safety stock was set according to the time in transit, the route changed, the logistics was slow, and the original stocking plan had to be adjusted accordingly. Now the supply chain is staring at resource warnings every day: not only the stockpiling of first-tier suppliers is counted, but also the finished product inventory of second-tier suppliers and the epidemic prevention policies of the regions where they are located.
The relevant person in charge of zero-running cars told China Entrepreneur that the company's vehicle production is still in normal progress, and the company's C11, T03 and their core components are produced in the Jinhua factory, which can effectively resist the supply chain risks caused by the epidemic to a certain extent.
Great Wall Motors also said that due to the impact of the epidemic in Shanghai, Jiangsu, Jilin and other places, many parts suppliers of Great Wall Motors have been affected, resulting in limited production capacity of the factory, and it is working with supply chain partners to minimize the impact. Its sales in March reached 101,000 units, up 43% month-on-month, but down slightly year-on-year.
Logistics that get stuck
For car companies that can produce in a short-term closed loop, the recovery of logistics is a top priority.
On April 8, the European Union Chamber of Commerce in China disclosed in a special letter that nearly 51% of the logistics and warehousing of German companies in China and nearly 46% of the supply chains of German companies in China were disrupted; 40% of German companies in China said that due to the epidemic control policy, the upstream supply chain operations were completely interrupted or seriously affected; for the downstream supply chain, not only the delivery of finished products to local customers was affected, but also the export of products to Europe was also hindered.
Source: Visual China
The European Union Chamber of Commerce in China estimates that shipping and trucking companies are experiencing lengthy delays, with cargo volumes at the port of Shanghai down about 40 percent compared to pre-lockdown levels.
As of the end of last year, shanghai's chip industry accounted for 1/4 of the country's scale, gathering more than 700 key enterprises in the industry. Although enterprises such as TSMC and SMIC have ensured the normal operation of factories through closed-loop production, they still lack logistics and distribution and cannot deliver products to customers.
According to the western macro report, from March 1 to April 9, the Shanghai vehicle freight flow index fell by 19.27% year-on-year; the national vehicle freight traffic index fell by 6.51% year-on-year. According to data released by the National Bureau of Statistics, the delivery time index of manufacturing and non-manufacturing suppliers in March was 46.5% and 45.2%, respectively, down 1.7 and 4.6 percentage points from the previous value, respectively, refreshing the new lows since the beginning of the epidemic in February 2020.
At present, the stabilization and recovery in the field of logistics has begun.
On April 11, the Joint Prevention and Control Mechanism of the State Council in response to the novel coronavirus pneumonia epidemic issued the Notice on Effectively Ensuring the Smooth Flow of Freight Logistics. The "Notice" requires that all efforts be made to smooth the transportation channels. It is strictly forbidden to block or close highways, ordinary highways and waterway locks without authorization. It is forbidden to shut down highway service areas, port terminals, railway stations and aviation airports without authorization, or to stop the crew change of ships on international voyages without authorization. During the shutdown of the expressway service area, basic public service functions such as refueling should continue to be retained.
Resources:
"Western Macro: What is the current situation of supply chains at home and abroad, and what is the impact? Zhang Jingjing, Chief Analyst of Western Macro
"The Tide of Shutdowns in China's Auto Industry under the Epidemic", Titanium Media
"Shanghai Automobile Industry Suspended: Waiting to Restart After Sudden Braking", Auto Market Story
"Stuck Auto Industry: 8,000 Employees Sleep in Factories, Wei Xiaoli Postpones New", Future Automotive Daily